The Indian rupee opened at record low on Monday, trading at 87.92, as it weakened by 50 paise against the US dollar. This comes on the heels of fresh threats of tariffs from US President Donald Trump on steel and aluminum imports loomed.
The performance of rupee follows a rate cut by the Reserve Bank of India last Friday, after which, the rupee strengthen by 15 paise to close at 87.43 against the US dollar. Friday’s strength in rupee came after the RBI, under new Governor Sanjay Malhotra, said the central bank will be focusing on smoothening volatility in the FX market, without targeting a specific exchange rate level.
RBI cut the repo rate by 25 basis points to 6.25% for the first time in five years at the end of the three-day MPC meet on Feb. 7. The RBI’s MPC meet voted unanimously to maintain a ‘neutral’ stance.
Following the Monetary Policy Committee’s announcement on only focusing on smoothening volatility, the local currency rose 25 paise to 87.33, against the greenback, opening higher at 87.48 a dollar. The rupee had closed at 87.58 on Thursday, according to Bloomberg data.
Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors LLP, had noted that the rupee is expected to open weaker at 88.00, following the RBI’s rate cut on Friday. The RBI is expected to cut rates by another 25 basis points in April to promote growth, as inflation appears to be on a downward trend, he said.
Bhansali expects the rupee to trade within a range of 87.70 to 88.10, with importers likely to buy on dips, while exporters wait and watch the movement.
US President Donald Trump plans to announce reciprocal tariffs on many countries by Tuesday or Wednesday, without specifying which countries, noted Kunal Sodhani of Shinhan Bank.
Trump announced plans to impose a 25% tariff on all steel and aluminum imports.
Sodhani noted that for USD/INR, 87.45 acts as a support level while 87.80 serves as resistance. The dollar index gained to 108.41 after Trump’s announcement, putting pressure on the euro and commodity-focused currencies like the Australian and New Zealand dollars, he said.
The move has added jitters over a potential global trade war, with China’s reciprocal duties coming into effect.
. Read more on Economy & Finance by NDTV Profit.Trump announced plans to impose a 25% tariff on all steel and aluminum imports. Read MoreEconomy & Finance, Markets, Notifications
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